The Definitive Legal Checklist For Startups

You’re excited and you’ve got an idea for a business that you think is going to change the world. But don’t get too excited, there are a few things you need to take care of first and our legal checklist for startups will help you do just that.

The last thing you want to do is launch your Startup haphazardly without making sure you’ve got all bases covered. This includes your legal bases. You need to do your legal groundwork before you launch your Startup.

A Startup is a serious commitment and this requires your legal due diligence.We know that legal matters can be confusing, complicated, and truly overwhelming. So we’ve created this definitive legal checklist for startups to help you.

Once you’ve finished reading this post, we’re sure you’ll feel confident knowing what legal bases you need to take care of before you launch your Startup.

1. Your Business Structure

You can choose from a sole proprietorship, limited company, or a corporation. We recommend you at least register your business as a Limited Company or a corporation. This keeps your personal assets and liability separate from your business in case of any lawsuits. They’ll both also allow you to hire staff freely and grow your business.

We don’t recommend you register as a sole proprietor. This kind of business structure is more suited to self-employed professionals or even small businesses.

Either way, choose carefully because the business structure you choose has tax and hiring implications that can affect your ability to get investors and grow.

2. Get Your Taxes In Order

As your Startup grows, you are undoubtedly going to attract the interest of the tax man. It’s crucial to understand what specific taxes you’re required to pay and how much. You can be sure the tax man will put a magnifying glass over your business to see if anything is wrong.

As mentioned in the previous point, the type of business structure you choose influences this. Don’t fret too much, though. Just speak with a legal professional first and you’ll know what your tax obligations are.

3. Intellectual Property Protection

Too many Startups ignore this and then get their ideas ripped off. We know that you want to bootstrap it and that money is tight, but you really can’t afford to take any chances with this one. The future success of your Startup hinges on it.

Imagine putting your ideas out there for a product only to find out it’s been stolen and the perpetrator is the one making millions of dollars in profit from it. It really happens too.

Don’t let yourself become a victim of this because you just wanted to bootstrap everything. Find out in advance whether you need trademarks, patents, or copyright protection.

This simple due diligence could save your business in the long-term.

4. NDA’s

An NDA is a non-disclosure agreement. Your business may not need one of these, but it also may need one. If you’re a Startup in the tech world you should probably get NDA’s for everyone working with you whether it’s investors, employees, and even manufacturers.

Basically, what an NDA does is protect confidential information in your business from being released to the public. And if it is released to the public, you’ve got the legal grounds to pursue action.

Make sure you speak with a legal expert and work out whether you’ll need an NDA or not. As a precautionary measure, it may just be best to get them.

5. Employee Contracts

Employee contracts outline the rights and responsibilities of those working for you. It lists out appropriate conduct as an employee of your organisation. It covers areas like payment, dealing with disputes, reasons for termination, and everything in between.

Make sure you classify your employees as employees as well, and that they’re receiving their correct benefits. If you’re using contractors you’ll need to make sure it’s spelled out that they’re contractors.

The bottom line is you can’t run your Startup without employee contracts. Think of them as paper guardians of your business. It’s non-negotiable you have them.

6. Get Your Licenses

Most businesses require some kind of operating licence. For example, if you’re a legal Startup you’ll need a licence to offer legal advice and practice it. The same applies to many other industries such as construction, manufacturing, and plenty more.

In many countries, there are usually national licences and sometimes even state, and regional licences. Don’t even think about operating your business without these or you will find yourself on the end of some massive fines.

7. Privacy Policies, Disclaimers, and TOS

Every Startup needs legal documents that protect their business. Some of the most important are privacy policies, disclaimers, and TOS. Without these three you could find yourself facing some serious lawsuits that could have easily been prevented.

Essentially, what these are, are documents that dictate the relationship between your business and consumers. It serves to limit any of your responsibility if something goes wrong when using one of your products or services. These documents need to be plastered everywhere.

If you’ve got a website then you need to create an agreement that outlines the responsibilities of the consumer once they start using your website. Trust us on this, taking these precautionary measures can save you a world of hurt.

8. Get A Buy-Sell Agreement

This is pretty straightforward but nonetheless, important. Even if you’re the sole owner of your Startup you should invest in getting a buy-sell agreement created because you may want to invite partners onboard and even a co-owner someday.

What a buy-sell agreement does is detail what happens in the event that a co-founder, owner, or a partner in the business dies or chooses to leave. It governs how much money will be paid out and then what happens to that person’s stake in the company.

9. Manage Your Accounts

Every serious Startup needs a business account. This should be common sense and this is where all money to business earns goes. The last thing you want to be doing is using any of your personal credit or income to fund your Startup. You want to keep this strictly separate from the business.

If you keep this separate from the business you’ll find it difficult to get things like a business loan, if you choose to get one. Ideally, the business account should be named in your company name.

10. Get Good Advice

Yes, we know it’s daunting and that there’s a lot of foundational work that goes into a Startup but the difference between being close to success and far from it is often good or bad advice.

You don’t want it to be the latter. You’ll need to consult experts in various areas to make sure you’ve got everything battered down tight. You’ll probably need legal experts in areas like employment law, business law, tax law, intellectual property law, and more.

It’s overwhelming but it’s necessary that you get the right advice or you’ll find yourself in a world of trouble later on.

11. Not Keeping Appropriate Documentation

We mean all types of documentation from tax records, payments to contractors and employees, investment funding, confidentiality agreements, and more.

Startups start experiencing trouble when they don’t document information properly. You need to be able to safely store and document everything you do in your business. We mentioned earlier one reason why, and that’s because the tax man will place a magnifying glass over your business.

Regarding tax you need to make sure all your documents are in order. You’ve got a whole raft of other forms as well, particularly relating to your employees. These forms all need to be stored and documented.

Use a cloud based storage system if you have to. The most important thing is to make sure you’ve got everything documented properly.

Final Words: Legal Checklist For Startups

You probably feel a little overwhelmed after reading this legal checklist for startups and seeing everything you need to do.

We won’t lie, we know that it can seem overwhelming especially when law isn’t your strong point. However, don’t despair. All you need to do is speak with one of our legal experts and we’ll help you get on the path to covering your legal bases.

Then you can launch your Startup with confidence and peace of mind, knowing you’ve got everything covered. Just thank your lucky stars that you found our legal checklist for startups!

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“I don’t want to spend an arm and a leg to get this done.”– Luke, Founder and CEO of Happy Clouds LTD

Luke is founder and CEO of Happy Clouds LTD, a cloud service provider for companies of all sizes. He started this business by himself but shortly after took on a co-founder, Lucy. Luke and Lucy have been working together for a year but have yet to set up a shareholders’ agreement.

They have been bootstrapping Happy Clouds’ growth and so have spent the bare minimum. A year on, the business is generating revenue and as the client base grows, Luke and Lucy need to ensure that their business foundations and customers contracts are bulletproof.

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“We are scaling up but we want to make sure we get everything updated and in place too.”– Liam, Co-Founder of WineToGo

Liam is the co-founder of WineToGo. His business sources wine from a large network of wine producers and helps their customers select the best wines for their taste to get delivered to their homes. He founded his business with 3 co-founders (Lance, Lily and Larry) and has a shareholders’ agreement in place. The four of them met at university and decided to build their marketplace.

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“My businesses are successful and I want legal services in the long term” – Lynn, Founder of ConsciousDressToImpress.com.

Lynn is a serial entrepreneur who has founded 6 businesses and successfully exited 3 of them. Her sixth and last business is a sustainable fashion brand that retails exclusively online on her website, ConsciousDressToImpress.com.

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6 contracts

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Annual business review conference call

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“I want a check-up on my contracts and make sure everything is in place.”– Logan, Founder of InvestMap App

Logan created the InvestMap App 5 years ago with one of his long-term colleagues, Lauren. InvestMap is the tool for people who never invested and want to start. Via the app, the consumer learns about how to make wise and long-term beneficial choices; is invited to invest at the right time, and gets updated on the next gold mine.

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It’s been 8 years since Leah created Move.In, selling kits for students moving to another city (including cutlery, first food, sanitary and emergency essentials). Leah started on her own the business but hired 41 employees during these couple of years. She has now 30 employees and operated over the United Kingdom, Germany and France.

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Leah was looking for someone who had expertise in both commercial contracts – ensuring she created real win-win situations in her partnerships – and employment – managing employee onboarding documents such as offer letters, employment and option agreements, staff handbook. Leah now works with a dedicated Linkilaw lawyer and is delighted that she is able to work with a senior lawyer at a rate that is significantly under her budget.

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1 hour per contract

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“I want to get legal work sorted with a moderate budget.”– Lara, App developer

Lara is an app developer who created custom mobile applications for startups. She often works from her clients’ offices to get immediate feedback on her work. When she’s not working from a client’s office, she works from a co-working space or from a local cafe. Her accountant recently told her she should create a business entity for tax and liability purposes.

Lara’s business is already taking off, so she has a moderate budget to spend on getting her legal work sorted. She knows she wants to incorporate her business, write her own terms of business to use with clients (instead of just accepting the terms they provide her with), and make sure her new website has the documents it needs, but she’s not confident in her legal knowledge. She wants access to legal advice for all the small questions that pop-up day-to-day.

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PRO MEMBERSHIP

Contracts (drafted by specialist lawyers)

3 contracts

Drafts allowed per contract

5 drafts

Type of communication

Digital + calls

Priority of service

Over non-members and digital members

Speed of contract turnaround

7 working days

Annual business review conference call

Included

Bonus legal advice

Unlimited

£4,000/year or £350/month

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